Consumer Protection Given Top Priority
The proposed insurance industry innovation plan, which was supposed to be announced within this year, will be finalized next year as officials at the Financial Supervisory Service (FSS) are finding it difficult to strike a balance between consumer protection and simplification of regulations.
The FSS has put a great deal of efforts into the plan, which was given top priority by FSS Governor Yoon Suk-heon. He gave unprecedented power to the innovation task force team.
According to financial authorities and the insurance industry on Dec. 3, the core of the innovation plan emphasized by is consumer protection. But enhancing consumer protection is bound to strengthen regulations on the insurance industry. The difficulty in improving consumer protection without further toughening regulations has been the reason for the slow progress in formulating an innovation plan.
The innovation plan features all ideas for consumer protection that the FSS already announced, including the compulsory establishment of internal control committees to strengthen self-regulation by large insurance agencies and the expansion of complete sales via non-face-to-face insurance sales channels such as telemarketing (TM) and home shopping.
Currently, the FSS and the task force team are discussing incomplete sales and consumer protection such as guidance on unclear insurance contract terms and erroneous insurance policies and the questionable payment of insurance money but it is hard to finish mapping out the innovation plan by the end of this year, financial authorities and analysts say.
In addition, the fact that the contents of the innovation plan are not much different from existing ones is another reason why the FSS was forced to postpone the announcement of the innovation plan.
Enhancing consumer protection will inevitably strengthen regulations for the insurance industry. The FSS is promoting reform by focusing on consumer protection, but an emphasis on consumer protection will introduce new regulations for the insurance industry after all, according to insurance industry experts.
For example, the simplification of insurance terms and insurance policies inevitably clashes with consumer protection. As for the simplification of insurance terms, it is good for insurers to do it on their own but no insurers do that way.
Moreover, if insurance policies are simplified, consumers will be confused about them so incomplete sales will increase. "The plan for consumer protection cannot help but be a repetition of past similar plans," said another official in the insurance industry. “It will be difficult to come up with a highly innovative one.”